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UrtheCast Reports First Quarter 2020 Financial Results

VANCOUVER, BC , June 29, 2020 /CNW/ - UrtheCast Corp. (UR.TO) ("UrtheCast" or the "Company"), a leading provider of information-rich products and services in the rapidly growing and evolving geospatial and geo-analytics markets, today announces financial results for the three months ended March 31, 2020 .

Highlights

  • Total Adjusted EBITDA1 for the Company improved by $0.5 million in Q1 2020 compared to Q1 2019 and Adjusted EBITDA1 from continuing operations declined by $0.2 million in Q1 2020 compared to Q1 2019.
  • The Company has signed a non-binding letter of intent with an institutional investor to provide equity or junior subordinated debt financing for a portion of the UrtheDaily project. Together with the expected senior secured debt, government funding and other supplier financing arrangements, these sources would finance the build, launch and operational commissioning of the UrtheDaily Constellation. The letter of intent includes a binding short-term exclusivity period for the parties to negotiate binding transaction terms for the equity or junior debt.
  • The Company also continues to make progress on securing the senior debt portion of the UrtheDaily financing and is working with selected institutional lenders to satisfy due diligence requirements and negotiate binding terms.

Q1 2020 Financial Results

As a result of the planned sale of the Deimos Imaging business or its assets, the operations of Deimos Imaging have been classified as a discontinued operation for the three months ended March 31, 2020 and the associated comparative prior period. Unless otherwise noted, the financial information in this press release is based on the Company's continuing operations and all financial figures are in Canadian dollars.

(in millions of Canadian dollars)

Q1 2020

Q1 2019

Revenue

$

4.4

$

4.4

Operating costs


7.8


6.6

Net loss from continuing operations


(2.5)


(1.1)

Net loss from discontinued operation


(8.6)


(5.1)

Net loss


(11.2)


(6.2)

Adjusted EBITDA from continuing operations (1)


(1.0)


(0.8)

Adjusted EBITDA from discontinued operation (1)


(0.6)


(1.3)

Adjusted EBITDA (1)


(1.6)


(2.1)


1 Non-IFRS earnings measure that does not have any standardized meaning prescribed by IFRS. See reconciliation of Adjusted EBITDA to Net Loss under "Non-IFRS Earnings Measures" in the Company's Management Discussion & Analysis for the three months ending March 31, 2020.

Donald Osborne , CEO of UrtheCast, commented, "Despite the unique challenges presented by COVID-19, our team's diligence and focus have enabled us to make important progress towards securing financing for the UrtheDaily Constellation. I am pleased to say that we have recently entered into a non-binding letter of intent with an institutional investor for equity or junior debt that will serve as the foundation of the UrtheDaily financing. Building on this positive momentum, we also continue to advance discussions for the remaining senior debt funding that will, in combination with expected government and supplier financing, enable us to complete the financing package and put our ground-breaking UrtheDaily Constellation into orbit.

During this unprecedented period, we worked hard to maintain the safety and wellbeing of our employees and partners, and I am proud that we have successfully adapted our processes and policies throughout the organization to sustain business operations in a safe manner that follows all local government guidelines.

In the meantime, we continue to make progress on our efforts to cut costs and rationalize the business, while benefitting from the differentiated geo-analytics capabilities of Geosys and building out our scalable, near-term service offering in UrthePipeline. By doing so, we are establishing the sustainable, cashflow-positive business that will propel the next phase of UrtheCast's development as a market leader in innovative geospatial and geo-analytics products and services."

Operating Results

UrtheCast recognized revenue of $4.4 million in the first quarter of 2020 and 2019, which was comprised entirely of geo-analytics products and services revenue from Geosys, including revenue from the 13-year geo-analytics imagery products and services contract with WinField , a Land O'Lakes, Inc. company.

Operating costs increased to $7.8 million in the first quarter of 2020 from $6.6 million in the first quarter of 2019, primarily as a result of the prior year quarter including Geosys' operating results only from the acquisition date of January 14, 2019 and due to an increase in amortization expense in the first quarter of 2020 as a result of commencing amortization of the Company's UrthePipeline ground segment systems development costs. SG&A costs from continuing operations, excluding Geosys, have been reduced by approximately 12% from the prior year.

Adjusted EBITDA from continuing operations of negative $1.0 million in the first quarter of 2020 decreased slightly compared to negative $0.8 million in the same quarter last year primarily due to an increase in operating costs of Geosys from the prior year, as described above.

The net loss from continuing operations of $2.5 million in the first quarter of 2020 increased compared to $1.1 million in the first quarter of 2019, due to the higher operating costs, as described above, and  increased finance costs associated with its various debt facilities and UrtheDaily financing activities, partially offset by a more favourable foreign exchange gain (loss) than in the prior year. The net loss also includes a lower gain on derivative financial instruments of $2.6 million for the first quarter of 2020, compared to a gain of $3.5 million in the first quarter of 2019.

The net loss from discontinued operation of $8.6 million in the first quarter of 2020 increased compared to a net loss from discontinued operation of $5.1 million in the same period of 2019, primarily due to an impairment charge of $7.4 million in the first quarter of 2020, partially offset by the impact of lower depreciation and amortization as the Company ceased depreciating Deimos Imaging's assets effective April 1, 2019 due to their held for sale classification. The SG&A costs of Deimos Imaging have decreased from $2.5 million in the first quarter of 2019 to $1.6 million in the first quarter of 2020 largely as a result of the Company's cost reduction initiatives.

Business Developments

CAD$1.0 Million Canadian Space Agency Contribution Award

In June 2020 , the Company was awarded an approximately $1.0 Million non-repayable contribution from the Canadian Space Agency (CSA) under its Space Technology Development Program (STDP) towards funding further development of the Company's UrthePipeline ground segment systems' enhanced analytics capabilities.

Deferral of Second Instalment Payable of US $3.5 Million to Land O'Lakes

The Company and Land O'Lakes agreed to further defer the remaining US $3.5 million of the second purchase price instalment for the Geosys acquisition, which would have otherwise been payable on May 14, 2020 . In consideration for an extension fee of US $0.25 million and interest accruing on the unpaid balance at 10% per annum beginning on May 15, 2020 , the next instalment, and this fee and interest, are now due on October 1, 2020 .

Extension of Existing Term Loans and Convertible Debentures

The Company is in continuing discussions with the lenders of (i) the secured US $12.0 million term loan which matured April 15, 2020 (ii) the US $1.5 million secured term loan entered into in June 2019 and the US $1.5 million secured term loan entered into in July 2019 , both of which matured January 15, 2020 , (iii) the $6.6 million convertible debentures which matured December 31, 2019 , (iv) the $5.0 million interest-bearing debentures which matured August 31, 2019 , and (v) the $2.0 million convertible debenture which matured March 31, 2020 , to further defer maturity and principal repayments as the Company seeks to finalize a binding commitment to finance the UrtheDaily Constellation.  None of these lenders have issued a notice of default to date, although there can be no assurances they will not do so in the future.

Corporate Update

As highlighted above, the Company has entered into a non-binding letter of intent with an institutional investor to provide equity or junior debt financing to fund a portion of the UrtheDaily project. This junior capital would satisfy one of the conditions for a senior secured debt facility which, together with government funding and other supplier financing arrangements, would finance the build, launch and commissioning of the UrtheDaily Constellation. This indicative letter of intent includes a binding short-term exclusivity period for the parties to negotiate binding transaction terms for the equity or junior debt, but is otherwise non-binding and subject to further negotiation between the parties and the satisfactory completion of the investor's due diligence.

As previously disclosed, the Company also continues to make progress on securing the senior secured debt portion of the UrtheDaily financing and is working with selected institutional lenders to satisfy due diligence requirements and negotiate binding terms. Management expects that such debt facilities will require first charge security liens against substantially all of the Company's assets, as well as significant dilution to shareholders through equity and/or warrant issuances to lenders. Management believes the indicative letter of intent for the junior capital portion is a positive development and demonstrates investors' support for the project, and is working to rapidly conclude a binding agreement and to obtain firm commitments for the other required components of the financing.

With regards to the sale of its Deimos Imaging business, the Company continues to engage in due diligence activities with interested parties in order to secure a binding sale agreement. While management remains confident in its strategy and is pleased with the progress of these ongoing discussions and indicative letters of intent, there can be no assurance that the Company will enter into binding agreements with respect to the financing of the UrtheDaily Constellation or the sale of the Deimos Imaging business.

Impact of COVID-19

In March 2020 , the World Health Organization declared the outbreak of the novel coronavirus disease known as COVID-19 to be a pandemic. The COVID-19 pandemic has caused a global market and economic downturn that is expected to have near-term impacts on securing new Earth observation data and geo-analytics products and services sales, collection of receivables from customers, and timely completion of milestones under the Company's existing engineering and value-added services contracts. This volatility and uncertainty has contributed to a deterioration of market conditions and a reduced outlook for Earth Observation data sales for the Deimos Imaging business as at March 31, 2020 , which has resulted in recognizing an impairment loss of $7.4 million in the results of its discontinued operation during the three months ended March 31, 2020 .

While we continue to execute and reach payment milestones under our government contracts and are working closely with our advisors to complete the proposed UrtheDaily Constellation financing and sale of the Deimos Imaging business, these efforts have been, and may continue to be, adversely affected or delayed by the COVID-19 pandemic and the government responses thereto, which have caused disruptions and volatility in equity and debt markets. We are continuing to monitor the situation closely and are prepared to further adjust our operations in Spain , France , the U.S. or Canada as needed to ensure minimal disruption to our business. Despite these challenges, management believes the Company's medium- and long-term outlook are strong, and its strategy remains unchanged.

Outlook & Going Concern

We refer you to the Company's consolidated financial statements for the three months ended March 31, 2020 and the related Management's Discussion & Analysis for further details relating to the Company's liquidity position. The Company has continued to take steps to seek to continue as a going concern and ensure  adequate liquidity in the near-term.

SELECTED FINANCIAL INFORMATION

The following table provides selected financial information of the Company, which was derived from, and should be read in conjunction with, the consolidated financial statements for the three months ended March 31, 2020 . All financial information is in thousands of Canadian dollars, unless otherwise noted, and except for number of shares and per share amounts.


Three Months Ended March 31,



2020


2019

Revenue    

$

4,376

$

4,425

Other operating income


853


331



5,229


4,756

Operating costs





Direct costs, selling, general and administrative expenses


5,568


5,237

Research expenditures


659


294

Depreciation and amortization


1,155


815

Share-based payments


392


229



7,774


6,575

Operating loss


(2,545)


(1,819)

Net finance costs


(3,174)


(1,636)

Gain on derivative financial instruments


2,557


3,475

Foreign exchange gain (loss)


516


(1,093)

Loss before income taxes


(2,646)


(1,675)

Income tax recovery (expense)


102


(29)

Net loss from continuing operations


(2,544)


(1,102)

Net loss from discontinued operation


(8,644)


(5,053)

Net loss


(11,188)


(6,155)

Other comprehensive loss


(1,750)


163

Comprehensive loss

$

(12,938)

$

(5,992)

Loss per common share, basic and diluted

$

(0.08)

$

(0.05)

Loss per common share, basic and diluted – continuing operations

$

(0.02)

$

(0.01)

Loss per common share, basic and diluted – discontinued operation

$

(0.06)

$

(0.04)

NON-IFRS EARNINGS MEASURES

The following table reconciles our Non-IFRS earnings measures to Net Loss prepared in accordance with IFRS.


Three Months Ended March 31,



2020


2019

ADJUSTED EBITDA:










Net loss from continuing operations

$

(2,544)

$

(1,102)

Add back (subtract):





Depreciation and amortization


1,155


815

Net finance costs


3,174


1,636

Income tax (recovery) expense


(102)


29

EBITDA from continuing operations


1,683


1,378

Share-based payments expense


392


229

Gain on derivative financial instruments


(2,557)


(3,475)

Foreign exchange (gain) loss


(516)


1,093

ADJUSTED EBITDA FROM CONTINUING OPERATIONS

$

(998)

$

(775)

ADJUSTED EBITDA FROM DISCONTINUED OPERATION


(641)


(1,293)

ADJUSTED EBITDA

$

(1,639)

$

(2,068)

About UrtheCast

UrtheCast Corp. is a Vancouver -based technology company that serves the rapidly growing and evolving geospatial and geo-analytics markets with a wide range of information-rich products and services.

For more information, visit UrtheCast's website at www.urthecast.com.

Non-IFRS Financial Measures

The Company prepares its financial statements in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board. This release includes certain non-IFRS financial measures, such as EBITDA, adjusted EBITDA, and adjusted EBITDA from continuing operations. The Company uses these non-IFRS financial measures as supplemental indicators of its operating performance and financial position. These measures do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to the calculation of similar measures used by other companies and should not be viewed as alternatives to measures of financial performance calculated in accordance with IFRS or considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These non-IFRS financial measures should be read in conjunction with the Company's financial statements and accompanying MD&A. An explanation of how the Company calculates these measures is set out in the Company's MD&A under the heading "Non-IFRS Earnings Measures", a copy of which is available on the Company's SEDAR profile and website.

Forward Looking Information

This release contains certain information which, as presented, constitutes "forward-looking information" or "forward-oriented financial information" within the meaning of applicable Canadian securities laws. Forward-looking information involves statements that relate to future events and often addresses expected future business and financial performance, containing words such as "anticipate", "plan", "explore", "target", "believes", "is seeking" and "expect", statements that an action or event "may", "should", "would" are "going" to occur or "will" be taken or occur, or other similar expressions and includes, but is not limited to, statements relating to:  UrtheCast's expectations with respect to its ability to raise capital and to continue as a going concern and management's plans to improve the Company's financial position; expectations regarding UrtheCast's ability to meet its obligations, obtain extensions, prevent lenders from issuing notices of default, and otherwise satisfy its liabilities under its existing indebtedness; expectations underlying the Company's financial statements, including that they have been prepared on a going concern basis, meaning that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations; expectations regarding the impacts of COVID-19 and government responses to the global pandemic; expectations regarding discussions of, and the proposed and/or planned sale or other monetization of all or substantially all of Deimos Imaging and its related business and the negotiations with interested parties in respect thereof; UrtheCast's expectations with respect to its ability to enter into a financing arrangement for the build, launch and commissioning of the proposed UrtheDaily financing, and to otherwise raise proceeds from a  debt or equity offering, achieve the required leverage and contracted value ratios and satisfy the conditions of its indebtedness and business needs generally, and the status and timing of any discussions in respect thereof, including with respect to the non-binding letter of intent entered into for the equity or junior debt portion of the financing; UrtheCast's ability to make or further defer upcoming milestone payments owing to Land O' Lakes and to successfully complete the second closing of the acquisition of Geosys on the terms set forth in the definitive purchase agreement or at all, as well as the Company's ability to service and obtain additional revenues from the Service Level Agreement with Winfield , a subsidiary of Land O' Lakes; UrtheCast's ability to meet its obligations and satisfy its liabilities under its existing indebtedness including but not limited to the previously announced term loan and convertible and non-convertible debt financings and amounts owing to financial, legal and technical advisors of the Company and its proposed investors and lenders; UrtheCast's ability to satisfy the conditions precedent to certain contracts related to the purchase of imagery data from the UrtheDaily Constellation or to amend the delivery dates thereunder to accommodate the current schedule for the UrtheDaily Constellation to commence operations; expectations regarding the performance of key subcontractors and the completion of certain customer contracts or achievement of payment milestones under the Company's engineering services contract, including as a result of COVID-19 impacts; and new product functionality and suitability, including market acceptance and use of UrthePipeline ground segment technologies;

Such statements reflect UrtheCast's current views with respect to future events and are necessarily based upon a number of estimates and assumptions that, while considered reasonable by UrtheCast as at the date of this press release, are inherently subject to significant uncertainties and contingencies. Many factors could cause UrtheCast's actual results or performance to be materially different from expectations that may be expressed or implied by such forward-looking statements, including, among others: the Company's ability, or inability, to rectify its current cash constraints and to continue as a going concern; additional complications and economic impacts arising from the COVID-19 pandemic, including second wave infections, closed borders, labour force disruptions, market volatility, credit disruptions, delays in financing, diligence and related market activities, vendor or customer defaults, and delays, cancellations or reduced growth in product and services sales; the Company's ability to enter into a financing arrangement for the UrtheDaily Constellation and to convert non-binding letters of intent into binding terms, and any delays or failures in the design, development, construction, launch and operational commissioning of the such constellation; the Company's ability to comply with debt and repayment obligations and avoid the exercise of lenders' rights, including with respect to seizing secured assets; substantial dilution of the Company's Common Shares as a result of conversion of outstanding debentures or the exercise of outstanding warrants, and the expected issuance of equity and warrants in connection with the UrtheDaily financing; unexpected increases in fixed or variable costs; lower than expected revenues from Geosys or the Company's other products and services; the loss of key personnel; unexpected delays in operations caused by key subcontractors, including due to impacts they are facing from COVID-19; the Company's ability to fund its future operations, which is contingent on its efforts to raise additional financing and/or sell certain assets of the Company; the Company's ability to successfully complete a sale of, or other transaction that would monetize, Deimos Imaging on commercially reasonable terms, or at all, or a significant further delay in the sale process; UrtheCast's ability to fund or defer the remaining installments for the purchase price of the Geosys transaction or otherwise successfully complete the second closing of the Geosys acquisition; loss, reduction in scope, termination, failure to satisfy conditions precedent or decline in general of the Company's agreements or relationships with its key partners, including Land O' Lakes, Inc. and purchasers of advance data purchase subscription agreements for the data expected to be provided by the UrtheDaily Constellation; risks related to the government funding received by UrtheCast and risks arising from breach or default of obligations under the related agreements with certain government agencies; delays or disputes with customers regarding the payment milestones under the Company's data imagery, engineering services or value-added services contracts; legal and regulatory changes;; and; as well as those factors and assumptions discussed in UrtheCast's Annual Information Form dated May 4, 2020 and Interim MD&A dated June 29, 2020 , each of which is available under UrtheCast's SEDAR profile at www.sedar.com. UrtheCast cautions readers that such factors and uncertainties are not exhaustive and that should certain risks or uncertainties materialize, or should underlying estimates or assumptions prove incorrect, actual results, performance or achievements may vary significantly from those expected. There can be no assurance that the actual strategies, results, performance, events or activities anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company.

UrtheCast undertakes no obligation to update forward-looking statements except as required by Canadian securities laws. Readers are cautioned against attributing undue certainty to forward-looking statements.

SOURCE UrtheCast Corp.


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